Best Non-Traded REITs

Investing in non-traded REITs provides investors with a way to access real estate assets without the daily price fluctuations of the stock market. Unlike public REITs, non-traded REITs are not available on major exchanges, which can make them less volatile and potentially offer higher dividend yields. These REITs focus on income-producing properties, making them appealing to those seeking regular income and long-term growth.

However, with limited liquidity, higher fees, and longer holding periods, non-traded REITs require careful consideration. For investors willing to commit to a long-term horizon, non-traded REITs can be a valuable addition to a diversified portfolio.

What is a Non-Traded REIT?

A non-traded real estate investment trust (REIT) is a type of REIT that is not publicly traded on a stock exchange. Instead, it is offered to investors through private placements, making it a less liquid investment compared to publicly traded REITs. Non-traded REITs typically raise capital by selling shares to investors before eventually listing on an exchange or liquidating.

Investing in a non-traded REIT provides investors with an opportunity to diversify their portfolio with real estate assets without directly owning property. These REITs often focus on income-producing properties such as commercial real estate, apartment complexes, or healthcare facilities. Investors receive dividends from the rental income generated by the properties held within the REIT.

Benzinga's Favorite Non-Traded REITs

• Best for Growth: Apartment Growth REIT
• Best for Dividends: 1st Streit Office
• Best for Commercial Real Estate: Growth & Income REIT
• Best for Diversification: RealtyMogul Income REIT
• Best for Accessing the Self Storage Market: SmartStop Self Storage REIT

Best for Growth: Apartment Growth REIT

The RealtyMogul Apartment Growth REIT is a non-traded REIT that invests capital in apartment complexes mostly located in what are considered to be resilient markets that can offer both current income potential and growth for the future. The Apartment Growth REIT has made quarterly distributions equating to 4.5% annualized based on the purchase price as it seeks to realize as much capital appreciation as possible, generally reaching those goals through renovation and the repositioning of those properties. 

Best for Dividends: 1st Streit Office

1st Streit Office is the non-traded REIT offering of Streitwise and comprises 2 Class A commercial properties along with properties that could be added in the future. These properties include the Allied Solutions Building, a $32 million mixed-use property in Carmel, Indiana, just outside Indianapolis, and Streitwise Plaza, a 290,000 square-foot office park in Sunset Hills, just outside St. Louis.

Best for Commercial Real Estate: Growth & Income REIT

The Growth & Income REIT is a fund that hopes to make both equity and debt investments in the commercial real estate sector that will leverage the valuation and growth potential of key U.S. markets, with a focus on diversified exposure, capital appreciation, income potential, and resiliency.

Best for Diversification: RealtyMogul Income REIT

The RealtyMogul Income REIT is a non-traded REIT that makes equity and debt investments in diverse commercial real estate properties. The REIT prefers to focus on providing monthly income to investors through diligent work on the back-end that can provide higher returns for all.

Historically, the REIT has paid annualized cash between 6% and 8% for well over 6 years, distributed nearly $30 million to investors, and purchased over $350 million in assets. 

Best for Accessing the Self Storage Market: SmartStop Self Storage REIT

The SmartStop Self Storage REIT bills itself as a “technology-driven” and self-managed REIT that is fully integrated with its operations team and manages over 15 million square feet of storage space in North America. 

How Are Non-Traded REITs Regulated?

A real estate investment trust (REIT) is a company that owns, operates, or finances income-generating real estate. The most common type of REIT is an equity REIT. An equity REIT uses a combination of its own capital and investor contributions to own and operate large commercial real estate portfolios, which are usually spread across multiple geographic markets. 

The real estate in equity REIT portfolios is carefully selected for its ability to generate net income from collected rents, which is distributed to investors (typically as a quarterly dividend). Secondly, REITs can make money when properties in the portfolio appreciate and are then sold, after which time those revenues are also distributed to investors. These portfolios offer the REIT sector a unique business model that could include shopping malls, retail centers, data centers, office buildings, and more, diversifying themselves by their very nature. 

In spite of the fact that non-traded REITs are not listed on any public exchanges, they are still subject to several layers of government regulation. First of all, they are required to create an investment prospectus and submit it to the U.S. Securities and Exchange Commission (SEC). Additionally, non-traded REITs are responsible for complying with the same regulatory report filing requirements of publicly traded REITs. Finally, non-traded REITs are required by the IRS to pay 90% of any taxable income generated by the REIT to shareholders. 

All these regulations are designed to protect the interest of shareholders and make sure the REIT is being operated properly. In short, an individual REIT’s “non-traded” or “private” status does not release it from an obligation to act fairly, ethically, and transparently with the investor’s hard-earned money. 

Pros and Cons of Non-Traded REITs

As with any investment opportunity, non-traded REITs have a number of different pros and cons. On the pro side, non-traded REITs offer the following potential benefits:

• High potential payouts
• A potential track record for a high dividend yield
• Significant tax benefits
• Equity ownership of real property
• Diversified portfolio to increase dividend income

On the con side, non-traded REITs have potential drawbacks, including:

• Less regulatory oversight
• High minimum investment
• Lack of liquidity for shares in the secondary market
• Long hold period

Invest in REITs with Wisdom

When you are investing in REITs, you are buying into retail income, investment strategies created by an experienced investment manager, and a property type that suits your strategy. You can invest based on how interest rates are changing, check share prices every day, and look at a REIT structure that you feel will help you guarantee future income or plan for retirement.

Frequently Asked Questions